Every four years the European Commission (DG TAXUD) reviews the European Directive on the structure and rates of excise duty applied to manufactured tobacco (Directive 2011/64/EU). This review is currently taking place and for the first time the inclusion of vape products within the Directive is being considered. In practice this would see the Commission setting a common excise regime for vaping across all 28 Member States. If the Commission went ahead with this, it would see vape products subjected to additional taxation and impose additional costs and administrative burdens on the industry. Critically, it would make the end product more expensive which would act as a disincentive to switching from smoking to vaping.
The European Commission has recently concluded a public consultation on this, and we hope that as many IBVTA members as possible took part. You can read IBVTA’s consultation response here.
So, what is IBVTA’s position and what have we been doing?
As an association, we are opposed to the introduction of an EU-wide excise regime for vape products, on the grounds that:
· Vape products are not tobacco products and therefore should not be subjected to a tobacco style taxation regime.
· It would be bad for public health, sending some vapers back to smoking and discouraging smokers from switching to vaping.
· It would have a negative impact on the compliant, legitimate vape industry as some vape businesses are forced to close and as vapers go to the informal economy to buy vape products.
· The arguments put forward in defence of this proposal do not stand up to scrutiny and the proposal goes against core EU principles.
· Critically, we know from experience that it would be costly and difficult to administer, and would generate very little income compared to the wider costs associated with this proposed tax.
IBVTA has been constructively engaged on this subject for nearly one year now. Over that time, we have:
· Expressed our concerns in two meetings with HM Treasury and HMRC.
· Expressed our concerns in two meetings with the lead officials in DG TAXUD.
· Expressed our concerns to the Department of Health.
· Worked with the economic consultancy engaged by the European Commission to produce an advisory report. Specifically, this involved arranging three meetings in London, two of which were for the industry to set out their concerns, and one was for individual vapers to set out their concerns from a consumer perspective.
· Been invited by the European Commission to Brussels to present our arguments against an EU-wide vape tax to members of the Fiscalis Project Group (Tobacco). This group is made up of finance ministry representatives from 20 EU Member States with an active interest in this subject. Presenting alongside IBVTA were two of the world’s largest tobacco companies that also have interest in vaping. It was disappointing to see one of those tobacco giants making the case for and setting out how the Commission should tax vape products.
Who would benefit from vape products being taxed in this way?
Smokers and vapers would not benefit as excise would only make a less harmful alternative to tobacco cigarettes more expensive. As we have seen from Italy and Portugal, where excise has been introduced, fewer people switched to vaping and many vapers went back to smoking. It is unlikely that governments would benefit as the revenues generated from excise on vape products are likely to be relatively small compared to the costs of implementing and collecting it. Those with a genuine interest in public health would also lose out. The only beneficiaries would be the tobacco and pharmaceutical industries as they would see a competitor product made more expensive which would result in fewer people switching from smoking to vaping and a large number of people moving back to smoking and NRT products.
The key health benefit of vaping devices is determined by how many smokers switch to them or use them as a staging post to quitting completely. It is therefore vital that they continue to be regulated and taxed as a consumer product. Many smokers have tried numerous times to quit using conventional NRT products and have failed, however with vaping they have all cut down their smoking or stopped completely. Vape products are however not some form of more effective NRT, they are totally different and need to be regulated and taxed accordingly.
If regulators, working with responsible vape product companies, develop the appropriate robust and proportionate regulatory and taxation regime then vape products can flourish and truly fulfil their potential in providing a viable and significantly less harmful alternative to tobacco products. However, if regulators and tax authorities introduce inappropriate and disproportionate regulatory and fiscal regimes then smokers will not make the switch and a once in a life time opportunity will have been missed. It is within this context that the debate surrounding the potential levying of excise on vape products must be considered.
As an association, we will continue to work with our members to constructively fight proposals for an EU-wide excise regime. With this in mind HM Treasury will be attending our conference in April to discuss this very issue and to answer any questions the industry may have. To book tickets for the conference, click here.